Where the money is / Government agencies have no choice but to target compensation

To reconcile a $20 billion shortfall, Gov. Arnold Schwarzenegger’s proposed 2010-11 budget includes plans to reduce the size of the state work force, to cut workers’ pay and to reduce the size of pensions for new hires.

As a result, it was denounced by leading Democratic strategist Steve Maviglio as an irrational “jihad” – an ideological assault by a Republican governor on the public employee unions who back Democrats each election.

There’s a big problem with this depiction. Famed bank robber Willie Sutton, when asked why he targeted banks, purportedly said, “Because that’s where the money is.” Given the explosion in public employee compensation costs in California, the revenue crisis gives elected officials in most agencies little choice but to try to reduce these costs. The other options are far less popular: raising taxes and/or sharply reducing basic services.

This dynamic is at play everywhere one looks in the Golden State.

In Sacramento, since the enormously destructive 1999 decision of the Legislature and Gov. Gray Davis to give a 50 percent retroactive pension increase to state employees, the cost to taxpayers of funding these pensions has increased 2,000 percent. Meanwhile, from 1997 to 2007, the number of full-time state-paid workers rose 24 percent.

In San Diego, even after dramatic reductions in pension benefits for new hires and other cost-saving measures, the long-term budget picture is so dire that a task force warns that the city may someday simply be unable to pay its bills.

In Los Angeles, city retirement costs are on track to consume one-fifth or more of the budget in coming years. The same is true in San Francisco.

Even before the recession battered its pension portfolio, Fresno County struggled for years to cover its pension costs, thanks to an irresponsible decision to let pay for unused vacation days be cashed out and factored into the highest salary year in setting pensions of individual employees. A similar policy in Contra Costa County has helped force a sixfold increase in recent years in money the county must set aside to fund the benefits.

Such compensation-driven budget horror stories are legion in California. Given this backdrop, it is impossible to ignore the extent and severity of what might be called California’s compensation crisis.

Thankfully, some responsible liberals won’t play Maviglio’s partisan games. This list starts with Willie Brown, former Assembly speaker and San Francisco mayor.

At some point, he wrote in The San Francisco Chronicle, California’s elected officials are “going to have to get honest” about the central role of employee costs in “state, county and city budget deficits.”

Willie Brown is exactly right. Until Brown’s honesty triumphs over Maviglio’s spin, these deficits will never go away.